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Amtrak President David Gunn

June 13, 2002 at 12:00 AM EDT


JIM LEHRER: Now, to David Gunn, the new president of Amtrak, the nation’s passenger rail service. He took over a month ago under a continuing congressional mandate to wean Amtrak off federal subsidies.

Last year its losses from serving some 60,000 passengers on 265 trains each day was more than $1 billion. A congressional panel, known as the Amtrak Reform Council, recently recommended breaking up Amtrak’s operations and allowing private companies to take over individual routes.

David Gunn is the former head of transit systems in New York City, Washington, and Toronto.

Mr. Gunn, welcome.

DAVID GUNN: Thank you. Glad to be here.

JIM LEHRER: One of the first things you did was to announce that, if Amtrak didn’t get $200 million by July 1, you were going to shut it down.

Now, that’s just not very far away. Is that still on the table?

DAVID GUNN: Oh, what that is, if you do a cash flow for Amtrak, the revenues minus expenses, we have a negative cash flow for July, August and September. And we need to borrow $200 million in order to sustain operations through the rest of the fiscal year. And that is… and that’s not a threat; that’s just the way that…

JIM LEHRER: The reality?

DAVID GUNN: The reality of the situation.

JIM LEHRER: Do you have it yet?

DAVID GUNN: No, sir, we don’t.

JIM LEHRER: Where are you going to find it?

DAVID GUNN: Well, we’re negotiating with banks. We have a credit facility, we’ve had one and we have borrowed before. But obviously, times are a little tougher right now, and we’re trying to get a loan from our bankers.

JIM LEHRER: Well, how serious… how serious is this threat? I mean how…

DAVID GUNN: It’s not a threat. This is not a threat. And I guess…

JIM LEHRER: Well, let me — how serious is the potential reality of Amtrak closing down on July 1?

DAVID GUNN: Well, I alternate between being optimistic and pessimistic. You know it depends on the moment.


DAVID GUNN: But I think we probably have a 50-50 chance of getting the loan.

JIM LEHRER: But you’re serious?

DAVID GUNN: I’m dead serious.

JIM LEHRER: …That if you don’t have the money, all the trains are going to stop.

DAVID GUNN: What will happen, if we don’t have the cash, is we will have to say we’re going to close down and do it in an orderly fashion. I mean that’s what’ll happen.

JIM LEHRER: All right. How did Amtrak come to this?

DAVID GUNN: Well, this is a result, I think, of… there’s two people… or two groups that can accept responsibility for this.

One is Congress — the politicians. They created Amtrak, and they put Amtrak on this fanciful search for self-sufficiency. There’s not a rail passenger system in the world that doesn’t require government subsidy for some either capital or operating or both. Now, that’s the first thing they did.

The next thing that happened is management attempted to do what the law required, which was to achieve self-sufficiency. And I think they tried far too long. They should have cried “uncle” request can a long time ago.

JIM LEHRER: And said forget, this isn’t possible?

DAVID GUNN: Well, they should have said,”this is going to fail,” because what’s happened now is we have a company that has run out of cash and that has… it has incurred enormous amounts of debt on its balance sheet.

We now have $3.7 billion of debt on our balance sheet. We added $700 million last year alone, last fiscal year. We have undertaken a number of initiatives, which have not proven successful. And so we have… and we’ve deferred a large amount of maintenance in trying to keep going under this mandate of self-sufficiency.

JIM LEHRER: So you can’t… you don’t have the power, even you don’t have the power to eliminate the mandate, so what are you going to do about it?

DAVID GUNN: Well, I can’t eliminate the mandate, but I can clearly tell people what’s going to happen. And hopefully, you know, sanity will prevail and the…

JIM LEHRER: Where? Where does it need to prevail?

DAVID GUNN: Well, at this point, it is either… either we convince our bankers to loan us the money, and I think they should, by the way, because we’ll be able to pay them back in the fall. I mean we will.

JIM LEHRER: Because you will have brought in enough money through the summertime…

DAVID GUNN: Well, no. We will get next year’s appropriation -

JIM LEHRER: Oh, I see.

DAVID GUNN: — and we can pay them back. So I mean in a sense, it’s a sure deal. But the thing that should actually happen is, I think that the administration and Congress should at least, they should… and we’ve had a lot of support from Congress, actually.

We’ve been getting a lot of support on several appropriations, which would… it wouldn’t solve the problem, but it would keep us going for a good period into the next year. And we’ve had support from a lot of… 160-plus congressman have signed a letter supporting us, 40, almost 50 Senators have signed a letter.

The administration so far has been silent in terms of what they want to do with this.

But we need, at this point, we… we don’t expect them to say that they have a long-term faith in Amtrak in all cases, but at least say they want us to make it into the fall.

JIM LEHRER: All right. Let’s say there’s somebody watching you right this moment who hasn’t been on… lives some place where there are no Amtrak trains. You know, they’re mostly on the East Coast and on the West Coast and then about every three days through some place in the middle.

DAVID GUNN: No. A little more frequent.

JIM LEHRER: But basically the middle part of the country, there are not very many trains.

DAVID GUNN: No, that’s right.

JIM LEHRER: It’s not an integral part of people’s transportation lives for the most part in large parts of this country.

DAVID GUNN: Yeah, that’s true.

JIM LEHRER: So, why should their tax money go to subsidize the federal…

DAVID GUNN: Well, we provide – we provide an essential service in certain areas.

I mean I think if you start on the West Coast, for example, like between Los Angeles and San Diego, we have a fairly frequent service there and move a lot of people. We operate commuter services in that area, for example, a peninsula commuter service. We operate the service to Sacramento, which is a pretty heavy and growing service, and we operate a service in the Northwest, an inner city service from Portland to Seattle, that corridor.

We operate three transcontinentals, transcontinental trains, which actually provide… in some areas it is a totally different sort of service, but it does provide mobility to some areas that don’t have a lot of options.

So you can ask the question: Does… when you go into a small town in Montana, you have a four-lane interstate even though there’s only a few people there. Government has a role, I think, to provide mobility generally.

But then when you get to the East Coast, I mean if you lose the Northeast corridor, I think all of a sudden Amtrak will mean something to an awful lot of people because we are the dominant carrier between Washington and New York and a big carrier north to Boston.

And we operate the commuter service in Boston, the New Jersey transit operates over our tracks and into Penn Station, which we used to own until we mortgaged it to try to stay afloat. Geez, that’s another thing they did. But so I mean I think…


DAVID GUNN: I think there’s a real role. Plus, the potential is there for rail passenger service, I think.

JIM LEHRER: Is the need there?

DAVID GUNN: Yes. Well, I think… I believe in this thing. I didn’t come from Nova Scotia to Washington to… because I…

JIM LEHRER: You were in kind of retirement, right?

DAVID GUNN: Yes, I was.

JIM LEHRER: Not kind of. You were.


JIM LEHRER: Okay. Well, is there… when you look at the long-range… I mean what you call inner city passenger service, particularly the transcontinental, I read something today that they only haul 18 percent of your passengers, but account for 75 percent of your loss?

DAVID GUNN: No. You’ve got to be very careful. There’s a lot of mythology about Amtrak’s economics.

Everything loses money. In other words, people will say it’s the long-distance trains, and if you got rid of them, the corridor would be a profitable company. Not so. The passenger movement or transportation market in the United States is thoroughly subsidized, whether it’s highway airlines or rail.

And what’s happened, like the basic structure of Amtrak is the northeast corridor covers most of its operating costs, the costs of the train crews and maintenance of the cars and so forth, but it does not cover its capital expenses. And we have an enormous deficit in that area.

Long distance trains have little capital needs, but they have big operating subsidy.

JIM LEHRER: Finally, what do you think of this idea of breaking up Amtrak?

DAVID GUNN: I think it’s absolutely… you want to buy it?

JIM LEHRER: No. No. (laughing)

DAVID GUNN: I’m authorized to give you a real good deal.

JIM LEHRER: A real good deal. But that’s all right. I’ll tell you, I’ll get back to you on that.

DAVID GUNN: And I also have a bridge. (laughing)

JIM LEHRER: Okay. No. Is that just really a bad idea, from your point of view?

DAVID GUNN: It makes no sense. What that is, is people who won’t… who are avoiding the basic issue, and that is: Do you want passenger rail service?

I mean what we should do, and we haven’t done a great job of it, is run the most efficient system and network that we can, and then the question is: Look, USAir wants $1 billion just to keep afloat, right, just for operating subsidy.

What you have to do is decide: Do you want… how do you want to move passengers in these various markets, particularly the Northeast Corridor.

JIM LEHRER: Mr. Gunn, good luck to you, and if you’ll leave your card here, I’ll get back to you.

DAVID GUNN: You’ll get back to me. Good.

JIM LEHRER: Yes, sir.

DAVID GUNN: I’ll give you a good price.

JIM LEHRER: All right. Thank you very much.